Why taxes are regarded as a leakage?

Taxes are regarded as a leakage because they represent a portion of income that is removed from the circular flow of money in the economy. When individuals and businesses pay taxes, that money does not circulate back into the economy through consumption or investment, reducing overall demand. This can lead to lower economic growth and can impact spending patterns. Additionally, the funds collected are often used by the government for various expenditures, which may not always align with immediate economic needs.